PT Newmont Nusa Tenggara (PTNNT) and Newmont Mining announced on September 22 receipt of a permit to export copper-gold concentrates from the Batu Hijau mine on Sumbawa Island in Indonesia. Export of concentrates from Batu Hijau had been blocked since January as a result of new government regulations, including requirements for development of domestic smelter and refining facilities, and the imposition of a progressive export duty on copper concentrates in the amount of 25% in 2014, rising to 60% by mid-2016.
The mine continued to operate at capacity through early June, when operations were suspended after it ran out of concentrate storage capacity (E&MJ, July 2014, p. 20).
PTNNT is 56% owned by the Nusa Tenggara Partnership B.V., which is owned 56.25% by Newmont Mining and 43.75% by a Sumitomo affiliate. Based on this partnership, Newmont Mining has an effective 31.5% ownership interest and Sumitomo has an effective 24.5% interest in PTNNT. Other ownership interests are PT Multi Daerah Bersaing, 24%; PT Pukuafu Indah, 17.8%; and PT Indonesia Masbaga Investama, 2.2%.
Newmont Mining is the projectoperator.
In the September 22 announcement, Newmont reported that ramp up of Batu Hijau operations had been under way since early September, following the signing of a Memorandum of Understanding (MoU) with the government. All employees and contractors necessary to maintain normal operations were being recalled in stages and would go through refresher safety training and reintegrated into their roles over the following six to eight weeks. Planned milling and mining levels were expected to be achieved during October.
Effective with the signing of the MoU, PTNNT agreed to pay export duties set forth in a new regulation issued in July; provide a $25 million assurance bond to demonstrate its support for smelter development; pay royalties of 4% for copper, 3.75% for gold, and 3.25% for silver; and pay a nominal rent per acre.
The MoU also outlines a mutual understanding on six key elements to be addressed in renegotiation of PTNNT’s Contract of Work (CoW). The six areas are: concession area size; royalties, taxes, and export duties; domestic processing and refining; ownership divestment; utilization of local manpower, domestic goods and services; and duration of the CoW. Once started, these negotiations regarding amendments to the CoW could take up to six months.
The September 22 announcement stated, “PTNNT supports the government’s strategy to increase domestic processing and has a Memorandum of Understanding to participate in a process with PT Freeport Indonesia designed to lead toward the development of a smelter. The company also has negotiated and signed conditional concentrate supply agreements with two Indonesian companies that publicly announced plans to build their own copper smelters in the country.”